India Weathering Doubts About Its Approach To Intellectual PropertyPublished on 18 November 2013 @ 10:43 am
By William New, Intellectual Property Watch
NEW YORK – The US Chamber of Commerce has been on a campaign to show that India’s recent treatment of intellectual property is harming foreign investment and its economy. Last week, the heavyweight Washington industry group brought its argument directly to the investment community in Manhattan.
The Chamber’s Global IP Center (GIPC) held the event “Innovation in India: A Risky Investment?” in the midtown financial district early on 14 November, catching investors before markets opened.
The Chamber did not do most of the talking, however. Presentations were made by a pair of think tank consultants: Shanker Singham, managing director of the Competitiveness & Enterprise Development Project at Babson Global (Washington, DC), and Paul Howard, senior fellow and director of the Center for Medical Progress at the Manhattan Institute (New York).
Additional perspective was offered by event moderator Rina Paul, director for international IP at the GIPC.
Unsurprisingly, both presenters made the argument that India is doing damage to itself and others by not sufficiently respecting intellectual property rights.
Over the past 12 to 18 months, there have been several developments in India related to patents that have stirred foreign industry and government criticism, but have been applauded by public health advocates. These include high-profile court decisions such as Novartis, in which the Supreme Court ruled that cancer drug Glivec cannot be patented in India because it does not represent a true innovation (IPW, Developing Country Policy, 1 April 2013). The outcome was seen as having a potential impact beyond India’s borders.
India also issued a compulsory licence on a medicine that caused significant concern among the patent-holding industry (IPW, Developing Country Policy, 4 March 2013).
Singham took an economic perspective, looking at competition and at IP rights as “a subdivision of property rights,” not just as a short-term monopoly intended to stimulate innovation. Singham said compulsory licences have a high cost, “destroying part of the economy.” Often there are other patented products, he said, and failure to protect an IP right is an anticompetitive distortion. Doing so “has a severe impact on the economy” of the country, he said, and the ones who are most harmed are the small companies.
Singham gave examples. In Italy, numerous companies ceased to exist after the country decided not to protect IP rights out of concern that it would only help foreign companies, he said. In Korea, venture capital increased after it embraced IPRs.
He argued that India has great potential, with its very high level of research in academic institutions, but it is failing to commercialise the research. India’s 2005 implementation of the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) encouraged investment and inventors who believed the country would protect IPRs. But, he said, “We have seen signs recently that suggest they are not going in a good direction.”
A concern of developed countries is that India’s IP policy is providing a model for other developing countries.
This is the subject of a conference taking place this week in Durban, South Africa, backed by the US biopharmaceutical industry and US government. The event is called “Creating and Leveraging Intellectual Property in Developing Countries,” from 17-20 November. A US academic said at that conference today that the new draft South African IP policy does reflect India’s law.
So with the “risk-to-reward” ladder not functioning, Indian talent is moving to the US, said Singham, demonstrated for instance by the fact that some 50 percent of startups in areas around Silicon Valley are by Indians. “The [Indian] government has to do something to reverse that,” he said.
Notably, Singham asserted that a WTO dispute settlement case could be brought against India for its handling of the compulsory licence, which allow generic production of a patented drug with royalties to the origin company. Such licences are permitted under TRIPS, but there is a “pathway” of conditions that must be filled in using it, he said. Compulsory licences were never intended as a remedy for antitrust law or as a market mechanism. “You have to prove there is an anticompetitive effect,” he said.
In general, Singham argued that erosion of IPRs erodes the underlying property right. It has been recommended to use this tool sparingly, he said, and when used it does not achieve the intended goal. “Governments have to be incredibly careful,” he said. For instance, a compulsory licence has been shown to have little price effect, but at the same time has the “huge downside” of creating market distortion.
But Singham said the economic problems are not limited to India. “The US does not have clean hands on this either. It distorts its market all over the place,” he said.
Indian Government Rebuttal
Meanwhile, from the audience, Devyani Khobragade, deputy consul general of India in New York, countered some of the charges made by Singham.
“I would not agree that India’s patent system is not TRIPS-compliant,” she said. “We’ve never had anyone tell us our patent system is not WTO compliant.”
She made a distinction that the system for companies to take cases is independent from the government. In the case of Novartis, she said, “It isn’t that the Supreme Court is final because it is right. It’s right because it’s final.”
She said India has a favourable investment environment, the highest number of researchers in the world, and downplayed the events of the recent months.
Just because of one compulsory licence and a couple of decisions, one cannot say the investment environment is off, she said.
“I still believe India has the competition advantage over China,” Khobragade said. But she acknowledged that India has “many things to do.”
The GIPC’s Pal followed to encourage engagement with India, saying that analysis shows that India ranked much lower on a global scale than other leading developing countries. GIPC circulated a glossy handout at the meeting entitled, “India: International Outlier on IP,” showing that it lagged well behind on attracting foreign direct investment and rates of innovation, among other negative effects of “India’s poor IP environment.”
Singham later said that “a lot of people have been trying to engage with the Indian government” without success.
Howard, for his part, looked at the pharmaceutical industry and in past decades the US took steps to make its market more attractive to companies, which helped it move past Europe as the center of pharmaceutical development. Among the factors was strong IP protection in the US, he said.
India also has benefited from the US system a huge exporter mainly of generic medicines. Now, he said, with the US and European markets saturated, emerging economies are looking at high growth, and there is a “lots of room” for pharma companies to expand there. But India’s failure to grant patents is a deterrent, and will be a problem for its economy, he warned.
Howard acknowledged that patent-holding companies want to exploit their patents by charging high prices. But he pointed to several other measures India could take to lower costs to importing companies, such as improve on the only 15 percent of the population that has healthcare, and lower tariffs on medical products.
He also said China appears to offer a better environment at the moment, demonstrated by its high number of resident patents and foreign firms investing and building there.
Finally, he said India stands to gain from supplying low cost products in global markets and should allow a “two-way street” by letting foreign firms compete.
Singham, meanwhile, also issued a warning to India that if other governments also do not recognise the value of the IP system, then there would be “a big global problem.”
Perhaps relevant, on the same day as the GIPC conference, GlaxoSmithKlline announced a multimillion dollar investment in India to set up a pharmaceutical manufacturing unit in India, according to a press report.
William New may be reached at email@example.com.
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